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Asked by Michael Ariestan on May 20, 2024

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The required safety inventory

A) increases with an increase in the lead time and the standard deviation of periodic demand.
B) decreases with an increase in the lead time and the standard deviation of periodic demand.
C) remains stable with an increase in the lead time and the standard deviation of periodic demand.
D) increases with a decrease in the lead time and the standard deviation of periodic demand.

Safety Inventory

A stock buffer maintained to mitigate risk of stockouts due to demand variability and supply chain uncertainties.

Lead Time

The duration between the initiation and completion of a process, such as the time from placing an order to its delivery.

Standard Deviation

A measure of the dispersion or variability within a set of data points, indicating how much variation exists from the average.

  • Gain insight into the link between inventory reserved for safety and achieving desired levels of product availability.
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siriprut saetieoMay 22, 2024
Final Answer :
A
Explanation :
The safety inventory is calculated as a function of lead time and standard deviation of periodic demand. As the lead time or standard deviation increases, so does the safety inventory required to ensure there is no stockout. Therefore, option A is correct as it states that the required safety inventory increases with an increase in the lead time and the standard deviation of periodic demand.

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